Exam 6: Fundamentals of Product and Service Costing

In a labor intensive company in which more overhead is used by the more highly skilled and paid employees,which activity base would be most appropriate for applying overhead to production?

Fill in the missing items for the following inventories: () () () () () Beginning Bal. \ 68,000 \ 7,100 \ 100,000 ? \ 85,200 Ending Balance ? 6,200 110,000 134,400 74,400 Transterred in 64,000 ? 75,000 153,600 ? Transterred out 76,000 22,000 ? 182,400 264,000

A company is considering the use of a single-stage cost allocation process.Under what conditions would this choice be justified?

How does job costing differ from process costing?

Fortify,Inc.uses a predetermined manufacturing overhead rate based on direct labor hours to apply its indirect product costs to jobs.The following information has been collected for the previous year: Fortify used 25,000 direct labor hours and 50,000 machine hours during the previous year.What is the predetermined overhead rate per direct labor hour? Direct materials \ 150,000 Direct labor 200,000 Sales commissions 100,000 Indirect labor 50,000 Rent on offic e equipment 25,000 Depreciation - factory building 75,000 Utilities - factory 125,000

The following information has been gathered for Catalyst Legal Services for its fiscal year ending December 31: What is the predetermined office overhead rate per billable labor dollar? Actual office overhead costs \ 1,275,500 Actual billable labor hours 44,600 Actual billable labor costs \ 3,960,000 Estimated office overhead costs \ 1,080,000 Estimated billable labor hours 48,000 Estimated billable labor costs \ 4,320,000

A system that mass-produces a single,homogenous output in a continuous process is a(n):

Carter Furniture manufactures three models of tables: oak,cherry,and walnut.All models are assembled in the same plant and require the same assembling operations.The difference is in the cost of the wood.The following data are available for July.Carter uses operations costing and assigns conversion costs on the number of tables built.Required: Compute the cost of the each of the three models for July.

Thompson Metal Corporation (TMC)supplies various types of machine tools to manufacturing companies.TMC has always paid a lot of attention to the quality of its products.Recently,an outside supplier has approached TMC to supply an important and intricate component of one of its more advanced tools that TMC has been manufacturing in-house.Sam Weiss,a junior accountant at TMC,has collected the following information regarding this proposal.The cost of manufacturing one unit of this component internally are as follows: The outside supplier has quoted a price of $90 per unit for supplying this component.The following is a conversation that took place among the manufacturing manager (Dana Rice),the buyer (Emily Scanlon),and Sam Weiss.Weiss: I think that we should continue to manufacture internally because we can save $1.90 per unit on this component.Rice: According to your report,we would save $1.90 per unit,but I do not agree with those numbers.Weiss: What do you mean? I have followed the same costing guidelines this company has used for years.I have even cross-checked my numbers with historical data and know for sure that the overhead rates which I have used are correct.Rice: I am sure you have done your job thoroughly,but I think that our costing system is archaic.This component is complex and difficult to manufacture.I believe that our overhead allocation method does not accurately capture the production difficulties and the additional resources that are devoted to the manufacture of this component.For example,a significant portion of our quality problems are due to this component.We spend close to a third of our quality inspection time on just this component alone,but that is not reflected.These quality problems cause delays in getting this component to the assembly department,and that causes a delay in getting the final product to the customers.Many of our customers are expecting just-in-time deliveries,and they get upset when we're late.Scanlon: I know that the supplier that has approached us has a strong reputation for quality.Therefore,we can rest assured that we will have negligible quality problems.Rice: Sam,your report does not consider this additional benefit from buying outside.I would appreciate it if you can rework your numbers to more accurately reflect the true costs associated with manufacturing this component internally.Required: (a)Assume the role of Sam Weiss.What are the different elements of costs that are likely to be associated with the manufacture of the component? Does the current costing system capture these costs? (b)Recommend improvements in the costing system.(c)How can Weiss quantify "qualitative" benefits such as quality and on-time delivery?

Misner Office Products produces three models of commercial shelving,the Basic,the Advanced and the Superior.Data on operations and costs for the month are: Required: Compute the predetermined overhead rate,assuming Misner Office Products uses: (a)Direct labor hours to allocate overhead costs.(b)Direct labor costs to allocate overhead costs.(c)Machine hours to allocate overhead costs.(d)Compute the unit cost for each model using direct labor costs to allocate overhead. Basic Aovanced Superior Total Machine hours 8,000 6,000 4,000 18,000 Direct labor hours 6,000 6,000 4,000 16,000 Units produced 1,000 500 250 1,750 Direct material costs \ 20,000 \ 12,500 \ 7,500 \ 40,000 Direct labor costs 129,000 100,000 71,000 300,000 Manutacturing 540,800 overhead costs Total costs \ 880,800

At the beginning of the year,manufacturing overhead for the year was estimated to be $267,500.At the end of the year,actual direct labor-hours for the year were 22,100 hours,the actual manufacturing overhead for the year was $262,500,and manufacturing overhead for the year was overapplied by $13,750.If the predetermined overhead rate is based on direct labor-hours,then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

The predetermined manufacturing overhead rate for the year was 140% of direct labor cost;employees were paid $17.50 per hour.If the estimated direct labor hours were 15,000,what was the estimated manufacturing overhead?

Spring Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year.Data for the upcoming year appear below: The predetermined overhead rate for the recently completed year was closest to: Estimated machine-hours 70,000 Estimated variable \ 6.68 per machine hour manufacturing overhead Estimated total fixed manufacturing overhead \ 1,283,800

For Case (A)above,what is the Ending Balance (EB)? Case (A) Case (B) Case (C) Beginning Balance (BB) \ 36,520 \ 15,100 \ 5,600 Ending Balance (EB) ? 11,400 12,200 Transterred In (T)) 166,200 ? 68,400 Transterred Out (TO) 164,400 93,200 ?

Job 599 was recently completed.The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of direct labor-hours.The predetermined overhead rate is $20 per direct labor-hour.Required: Compute the unit product cost that would appear on the job cost sheet for this job. Direct materials \ 40,610 Direct labor-hours 1,147 Direct labor wage rate \ 11 per Number of units completed 3,100 units

Horton Industries Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year: Horton estimates that 5,000 direct labor-hours and 10,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be: Direct materials \ 10,000 Direct labor \ 30,000 Sales commissions \ 40,000 Salary of production supervisor \ 20,000 Indirect materials \ 4,000 Advertising expense \ 8,000 Rent on factory equipment \ 10,000

MegaRock produces quick setting concrete mix.Production of 200,000 tons was started in April,190,000 tons were completed.Material costs were $3,152,000 for the month while conversion costs were $591,000.There was no beginning work-in-process;the ending work-in-process was 70% complete.What is the material cost of the product that remains in work-in-process?

Mason Industries restarted operations on September 1 after a 3 month shutdown.There were no beginning inventories.The following operations data are available for September and the one product the company refines: All production at Mason is sold immediately.Required: (a)Compute cost of goods sold for September.(b)What is the value of the work-in-process inventory on September 30?

One of the most common decisions facing managers is determining the price at which to sell one of their products or to provide their services.

Flare Co.manufactures textiles.Among Flare's 2016 manufacturing costs were the following salaries and wages: What was the amount of Flare's 2016 direct labor? (CPA adapted) Loom operators \ 120,000 Factory foremen 45,000 Machine mechanics 30,000